Black Applicants Are Denied Mortgages 84% More Often Than Whites: Report

Mortgage applicants from Black homebuyers are being denied at a rate 84% higher than white applicants, according to a new report from Zillow Group Inc. Z ZG. This marks a dramatic uptick from the 74% rate recorded in pre-pandemic 2019.

What Happened: In an analysis of 2020 statistics culled from the Home Mortgage Disclosure Act, Zillow determined that 19.8% of Black applicants were denied a mortgage during 2020, the highest rejection rate for a racial demographic. In comparison, 10.7% of whites faced a similar rejection last year.

Black applicants experienced the highest denial rates in Mississippi (31%), Louisiana (26.1%), Arkansas (26%) and South Carolina (25.8%). More than one-third of Black borrower denials were attributed to credit history.

Furthermore, Zillow observed that Black home purchase applicants had a median income of $67,000, whereas the median was $83,000 for all applicants. Black applicants put down a median of 3.5% on home purchase applications, slightly above the 3% minimum required for most conventional loans and lower than the overall median down payment of 8.9% from all applicants.

Black applicants also typically sought to acquire less-expensive properties than applicants from other races. A median property value of $225,000 for Black applicants versus $275,000 for all applicants. As a result, Zillow noted that their home values are worth 16.7% less than homes overall.

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Why It Matters: Black homeownership reached a peak in 2004 at 49.7%; it is currently at 44%. The national homeownership rate is 65.4%.

"Homeowners have seen a plethora of housing gains during the pandemic, but the growing disparity between Black and white homeownership rates and home values paints the picture of who those winners actually are," said Zillow economist Nicole Bachaud. "While credit borrowers overall are stronger now than ever, the gap in credit access is growing along racial lines. Policies and interventions that target the barriers keeping Black Americans from homeownership are keys to achieving housing equity."

Photo: Gerd Altmann / Pixabay